Sustainability-related disclosures

Information regarding principal adverse impact, updated October 30 2024.

Sections titled “Consideration of principal adverse impacts on sustainability factors for Altor Fund VI, Altor I Co-Invest, Altor III Co-Invest and Altor FF VI” and “Sustainability-related disclosures – Part 1”(including sub-sections in such disclosure), updated October 30 2024.

Section titled “Sustainability-related disclosures”, updated December 28, 2023.

Section titled “Sustainability-related disclosures”, updated August 30, 2023.

Information regarding principal adverse impact, updated June 15, 2023.

Section titled “Sustainability-related disclosures”, published Dec 30, 2022.

Information regarding principal adverse impact and transparency of the promotion of environmental or social characteristics of the Altor Funds, updated Dec 15, 2022.

Information regarding principal adverse impact, updated Nov 1, 2022.

As stated in Altor Fund Manager AB’s (“Altor”) Responsible Investment & Ownership policy (the “RIO policy”) being a world-class company and a world class investor includes ensuring high environmental, social and governance (ESG) standards which goes hand-in-hand with Altor’s longer-term ownership horizon. The commitment is intended to ensure that Altor contributes to the creation of companies that foster a sustainable future. Altor is of course committed to adhering to the EU’s Sustainable Finance Disclosure Regulation ((EU) 2019/2088) (the “SFDR”) and making available sustainability-related information with respect to the funds and the investment process.

Sustainability matters are typically considered already in Altor’s early sourcing discussions in the context of industry, geographic scope, and maturity of potential targets. In the due diligence process, it is mandatory to present and consider the sustainability risk profile of a target. Altor has a formalized risk management framework, encompassing the investment process from pre-acquisition due diligence to investment monitoring. Prior to each investment a standardized questionnaire, referred to as the Risk Summary and containing a sustainability section, is distributed to the investment team for completion. Questionnaires are collected, reviewed, and approved by Altor’s Risk Committee as well as in scope for internal audit. Several investment opportunities have historically been disregarded due to sustainability concerns.

Beyond the investment decision-making process Altor also considers sustainability risk profiles post-acquisition through mandatory annual discussions at the board level.

More information on how Altor integrates sustainability in its investment decision-making and ownership process can be found in Altor’s RIO policy.

Integration of sustainability risks into remuneration policies

Altor has adopted a remuneration policy which is consistent with Altor’s integration of sustainability risks in its investment processes. Remuneration to employees is determined on the basis of an annual performance review, and both financial and non-financial criteria are taken into account in the review. The non-financial criteria include compliance with Altor’s values (of which one being sustainability) and compliance with the firm’s RIO Policy (as relevant depending on each employee’s role and function), which outlines how Altor manages sustainability-related risks and opportunities throughout its screening, sourcing, and active ownership.

Altor is not required to and does not currently consider adverse impacts of its investment decisions on sustainability factors on an entity level according to Article 4 of the SFDR. This is because Altor is not currently in a position to obtain and/or measure all the data which would be required according to the SFDR to report systematically, consistently and at a reasonable cost with respect to our investment strategy.

We believe that our main challenge to be able to consider principal adverse impacts (“PAI”) currently is to ensure the data quality and reporting timeliness. However, we aim at being able to fully consider and report on PAI of investment decisions on sustainability factors according to Article 4 of the SFDR by 2025. As such, we have an ongoing process of developing our processes for obtaining and measuring the data needed and we will be able to report on our progress and certain data relating to PAI of investment decisions on sustainability factors during 2023 and 2024 in our annual sustainability report. Please note that such reporting will be made separately from, and will not constitute, the consideration of or reporting of PAI as is set out by the SFDR and the Commission’s Delegated Regulation to the SFDR ((EU) 2022/1288).

Altor Fund IV (No. 1) AB, Altor Fund IV (No. 2) AB (together “Altor Fund IV”), Altor Fund V (No. 1) AB and Altor Fund V (No. 2) AB (together “Altor Fund V”), Altor Fund VI (No. 1) AB and Altor Fund VI (No. 2) AB (together “Altor Fund VI”), Altor I Co-Invest AB, Altor III Co-Invest (No. 1) AB and Altor III Co-Invest (No. 2) AB (together “Altor III Co-Invest”), and Altor FF VI AB (“Altor FF VI”) consider PAI on sustainability factors on a product level according to Article 7 of the SFDR. This is further elaborated upon in the funds’ respective periodic disclosures, which are published annually.

This disclosure is made for Altor Fund IV (No. 1) AB, Altor Fund IV (No. 2) AB Altor Fund V (No. 1) AB, Altor Fund V (No. 2) AB, Altor Fund VI (No. 1) AB, Altor Fund VI (No. 2) AB, Altor I Co-Invest AB, Altor III Co-Invest (No. 1) AB, Altor III Co-Invest (No. 2) AB, and Altor FF VI AB (together, the “Funds”). The Funds are managed by Altor Fund Manager AB (“Altor”).

Altor FF VI is a feeder fund of Altor Fund VI, the information herein therefore applies to Altor FF VI indirectly. Consequently, all references to “portfolio companies” shall be construed as Altor FF VI’s indirect investment through its investment in Altor Fund VI.

Summary (for the summary in Swedish, please click here)

The Funds promote environmental or social characteristics but do not have as its objective sustainable investment. The Funds promote in particular the following environmental and social characteristics, which all relate to the UN 17 Sustainability Development Goals (“SDGs”). In respect of Altor FF VI, the fund promotes the environmental or social characteristics indirectly through its investment in Altor Fund VI.

• Diversity and inclusion (relates to SDG 5, Gender equality);


• Working conditions and living wage (relates to SDG 8, Decent work and economic growth);


• Environmental performance and circular resource management (relates to SDG 12, Responsible consumption and production); and


• Climate action (relates to SDG 13, Climate action).

The Funds’ investment strategy used to meet the environmental and social characteristics promoted by the Funds include for example applying an “exclusionary list” meaning that the Funds will not, directly or indirectly, invest in certain companies and that the Funds are signatories to the UN Principles for Responsible Investments (UN PRI).

Altor’s policy to assess good governance practices of the portfolio companies of the Funds includes that all portfolio companies are required to follow Altor’s Sustainability Standards (as defined below), including regarding governance, as listed in Altor’s RIO policy.

The abovementioned environmental and social characteristics that the Funds promote shall be attained by, inter alia, compliance with the standards listed in Altor’s Sustainability Standards which applies both to Altor and the portfolio companies which the Funds invest in. Altor’s Sustainability Standards and the environmental and social characteristics promoted by the Funds will be monitored via Altor’s annual sustainability performance monitoring process. The monitoring process will entail that sustainability metrics (including information relating to PAI indicators), at least as per the ESG Data Convergence Initiative (www.esgdc.org), are collected from the portfolio companies of the Funds via a digital platform and thereafter analysed versus certain factors. The aforementioned performance monitoring process will be internally reviewed regularly, and at least on an annual basis, in order to ensure its continued usefulness and efficiency.

Altor’s Sustainability performance monitoring process will be used also as the methodology to measure how the social and environmental characteristics promoted by the Funds are met.

Altor uses sustainability metrics reported from portfolio companies as the data source to attain the environmental and social characteristics promoted by the Funds. To ensure proper data quality Altor have engaged a third-party advisor that will perform limited assurance on the data provided.

The major limitation with using the abovementioned sustainability performance monitoring process and using reports from the Funds’ portfolio companies that Altor has identified is if portfolio companies do not report on the requested data and/or report data with lacking quality and/or coverage for their respective operations. Altor will work closely with portfolio companies to ensure that the companies understand the importance of reporting as well as how they should report, in order to minimise such limitation. Furthermore, Altor deems the risk of portfolio companies not reporting and/or providing insufficient reports as low.

The due diligence of potential underlying assets of the Funds are conducted in-house and/or by external advisors. Sustainability matters are typically considered already in early sourcing discussions. In the due diligence process, it is mandatory to present and consider the sustainability risk profile of a potential investment. As part of completing such sustainability risk profile, the investment team needs to fill out a standardized questionnaire, referred to as the Risk Summary which also contains a detailed sustainability section. The purpose of the procedure is to assess whether or not a potential investment can be considered to promote environmental or social characteristics under the SFDR. The Risk Summary is reviewed and approved by Altor’s Risk Committee before Altor’s board of directors may decide whether to take the potential investment forward.

Altor always acts as an active owner. Altor’s active ownership includes that all the Funds’ portfolio companies shall establish a Sustainability point of contact within their own organisation. Furthermore, sustainability shall be part of each portfolio company’s value creation agenda, and following any Fund’s investment in a new portfolio company, assessments shall be made to integrate Sustainability to the 3-year value creation master plan that Altor helps draft for each portfolio company.

No index has been designated as a reference benchmark to meet the environmental or social characteristics promoted by the Funds.

No sustainable investment objective

The Funds promote environmental or social characteristics but do not have as their objective sustainable investment. In respect of Altor FF VI, the fund promotes environmental or social characteristics indirectly through its investment in Altor Fund VI.

Environmental or social characteristics of the financial product

The Funds seek to manage up performance across all material sustainability topics, and promote in particular the following environmental and social characteristics, which all relate to the SDGs adopted in 2015 as part of the 2030 Agenda for Sustainable Development. In respect of Altor FF VI, the fund promotes the environmental or social characteristics indirectly through its investment in Altor Fund VI.

• Diversity and inclusion (relates to SDG 5, Gender equality);


• Working conditions and living wage (relates to SDG 8, Decent work and economic growth);


• Environmental performance and circular resource management (relates to SDG 12, Responsible consumption and production); and


• Climate action (relates to SDG 13, Climate action).

Investment strategy

The Funds are established with the objective of realising attractive private equity returns through equity, equity related and/or debt investments principally in buyouts and growth capital transactions and principally in portfolio companies in Denmark, Finland, Norway, Sweden but also DACH. In respect of Altor FF VI, the fund has been established for the sole purpose of making investments in Altor Fund VI. The Funds’ investment strategy used to meet the environmental and social characteristics promoted by the Funds include for example:

• Applying an “exclusionary list” meaning that the Funds will not, directly or indirectly, invest in companies relating to certain different sectors/themes/countries;


• Investing with the ambition to uplift ESG standards and performance as per Altor’s RIO policy as a way to future-proof companies as Altor believes this to be part of its fiduciary duty;


• Being a signatory to the UN Principles for Responsible Investments (UN PRI) and placing emphasis on the four SDGs as described above.

The abovementioned “exclusionary list” can be found in the RIO policy, which may be found here.

Altor’s policy to assess good governance practices of the portfolio companies of the Funds includes that all portfolio companies are required to follow Altor’s Sustainability Standards (as defined in section “Monitoring of environmental or social characteristics” below), including regarding governance, as listed in the RIO policy. Furthermore, Altor annually asks and assesses several questions in regards to good governance to all portfolio companies. Such questions include, inter alia, whether the portfolio companies have a Code of Conduct policy, anti-corruption policy and third-party-whistleblowing processes in place and if the companies have been involved in violations of the UN Global Compact principles or OECD Guidelines for Multinational Enterprises. In its assessment, Altor especially focuses on sound management structures, employee relations, remuneration of staff and tax compliance.

Proportion of investments

The Funds do not intend to make sustainable investments based on a committed minimum proportion. However, any sustainable investments that the Funds may make, even though this is not the objective, will be reported on in the Funds’ annual reports, for the relevant reference period. The Funds intend to promote environmental or social characteristics to a minimum percentage of 90 as regards direct exposures in each Fund’s portfolio companies.

A minor portion of the portfolio in terms of total net asset value, 10 percent, may be consisting of other balance sheet items that are not possible to align with environmental and/or social characteristics, for example, cash, cash equivalents, accounts receivable and accounts payable.

Altor makes the assessment that the Funds (other than Altor FF VI) will not have any other types of exposures than direct exposure to the Funds’ portfolio companies. However, Altor FF VI will have indirect exposure to the Funds’ portfolio companies through its investment in Fund VI.

Monitoring of environmental or social characteristics

The abovementioned environmental and social characteristics that the Funds promote shall be attained by, inter alia, compliance with the standards listed in Altor’s Sustainability Standards which applies both to Altor and the portfolio companies which the Funds invest in. Altor’s Sustainability Standards include the below standards, among others, and the full list with additional detail can be found in the RIO policy here.

Environmental standards

• Being fully compliant with relevant local and international environmental legislation and conventions (zero incidents), in own operations and in the supply chain (material part of supply chain), and active screening and awareness of upcoming relevant regulation/standards.


• Having a 1.5 degree aligned near-term science-based target approved no later than by 2025, to focus on rapid deep emission cuts.


• Having a long-term net-zero target with a target date no later than 2050, but striving for 2045.

Social standards

• Committing to a living wage in own operations and throughout the supply chain, by guaranteeing wages and benefits paid for a standard working week meet, at a minimum, national legal standards, or industry benchmark standards, whichever is higher. In any event wages shall always be enough to meet basic needs and to provide some discretionary income.


• Actively promoting diversity by working towards fair representation (in line with industry standard) of underrepresented groups in employee recruitment and staffing of leadership positions, empowering minorities through training, addressing unconscious bias, creating an inclusive culture. In particular with regards to gender diversity.

Governance standards

• Maintaining high standards of business ethics, incl. being fully compliant with relevant local and international legislation and conventions on anti-corruption (incl. extortion and bribery), antitrust/fair competition and tax (zero incidents), and active screening and awareness of upcoming relevant regulation/standards.

Altor’s Sustainability Standards and the environmental and social characteristics promoted by the Funds will be monitored via Altor’s annual sustainability performance monitoring process. The monitoring process will entail that sustainability metrics (including information relating to PAI indicators), at least as per the ESG Data Convergence Initiative (www.esgdc.org), are collected from the portfolio companies of the Funds via a digital platform and thereafter analysed versus the following factors

• Altor’s Sustainability Standards in the RIO policy;


• Prior year performance; and


• Industry standard performance/benchmarks.

The abovementioned performance monitoring process will be internally reviewed regularly, and at least on an annual basis, in order to ensure its continued usefulness and efficiency. Cross-checks and spot-checks will also be made in relation to the analysis of the sustainability metrics provided by the portfolio companies and any unclear reports from a portfolio company will be followed-up upon without delay.

Methodologies

Altor’s Sustainability performance monitoring process will be used also as the methodology to measure how the social and environmental characteristics promoted by the Funds are met. As regards what the monitoring process will entail, please refer to the section “Monitoring of environmental or social characteristics” above.

Data sources and processing

Altor uses sustainability metrics reported from portfolio companies as the data source to attain the environmental and social characteristics promoted by the Funds.

To ensure proper data quality Altor have engaged a third-party advisor that will perform limited assurance on the data provided from the portfolio companies to the Funds.

The data will be internally processed at Altor and Altor’s current view is that it will not rely on any third-party estimated data.

Limitations to methodologies and data

The major limitation with using the abovementioned sustainability performance monitoring process and using reports from the Funds’ portfolio companies that Altor has identified is if portfolio companies do not report on the requested data and/or report data with lacking quality and/or coverage for their respective operations.

Altor will work closely with portfolio companies to ensure that the companies understand the importance of reporting as well as how they should report, in order to minimise the limitation mentioned above. As further described in section “Engagement policies” below, Altor is also an active owner in relation to, inter alia, sustainability matters and there is continuous communication between each portfolio company and Altor regarding sustainability related matters. Consequently, Altor deems the risk of portfolio companies not reporting and/or providing insufficient reports as low, resulting in that the risk of the abovementioned limitation affecting how the environmental and social characteristics promoted by the Funds are met also is low.

Due diligence

The due diligence of potential underlying assets of the Funds are conducted in-house and/or by external advisors co-ordinated by the respective investment team established by each Fund and its advisor and dedicated for the relevant potential investment. Altor’s Investment Advisory Committee is ultimately responsible for the due diligence.

Sustainability matters are typically considered already in early sourcing discussions in the context of industry, geographic scope, and maturity of potential targets, especially with regards to exclusionary screening as per the exclusionary list in the RIO policy. In the due diligence process, it is mandatory to present and consider the sustainability risk profile of a potential investment. As part of completing such sustainability risk profile, the investment team needs to fill out a standardized questionnaire, referred to as the Risk Summary which also contains a detailed sustainability section. In the sustainability section, the investment team need to answer if certain ESG/sustainability topics are material or not, what current performance and risk is for the material sustainability topics of the potential investment compared to relevant industry average and/or regulatory requirements, and what future opportunity the team sees for the potential investment to reach the Altor Sustainability Standards as per the RIO policy. The purpose of the procedure is to assess whether or not a potential investment can be considered to promote environmental or social characteristics.

In addition to the abovementioned, the due diligence includes an analysis of value creation opportunities, relevant legal, tax, financial or other value affecting factors.

The results of the due diligence are considered by the investment team in dialogue with the central Sustainability resources, who creates a proposal for a binding offer regarding the relevant potential investment if they deem the results satisfying. The proposal is then reviewed by the Investment Advisory Committee who decides whether to recommend that Altor’s board of directors decides to move forward with the binding offer. The proposal is also reviewed and assessed by both Altor’s Risk Committee and Risk Manager, as regards compliance with the relevant Fund agreement, as well as by Altor’s Investment Committee, before the board of directors may decide whether to take the potential investment forward. Included in the Risk Committee’s review is the abovementioned questionnaire, which is also approved by the Committee. Furthermore, the Risk Summary questionnaire is in scope for Altor’s internal audit.

Engagement policies

Altor’s investment and ownership approach is to act as an active owner, including forwarding Altor’s sustainability agenda, irrespective of a majority or minority ownership position in both private and public settings. Altor’s active ownership includes that all the Funds’ portfolio companies shall establish a sustainability point of contact within their own organisation that is responsible for the execution of the portfolio company’s sustainability related policy (or equivalent policies).

Sustainability shall be part of each portfolio company’s value creation agenda, and following any Fund’s investment in a new portfolio company, assessments shall be made to integrate Sustainability to the 3-year value creation master plan that Altor helps draft for each portfolio company. Furthermore, sustainability performance and risk matters shall be discussed at least twice a year by each portfolio company’s board of directors, and all portfolio companies shall at least annually report progress across material sustainability metrics (including information relating to PAI indicators), at least as per the ESG Data Convergence Initiative (www.esgdc.org), to Altor, and upon occurrence and at least quarterly on any potential incidents.

Should any sustainability-related controversies occur in any of the portfolio companies, Altor will, where relevant, take the following measures

• Ensure that internal investigations are conducted;


• Reconfirm the appropriateness of the governance and compliance set-up with the aim of strengthened processes and capability training;


• Through the board of directors assess the appropriateness of the management team; and


• Ensure full cooperation with authorities.

In addition to the above, and as the most basic level of Altor’s active ownership, Altor of course also exercises its voting right at general meetings and participates in nomination procedures to influence the composition of the board in any of the Funds’ portfolio companies.

Designated reference benchmark

No index has been designated as a reference benchmark to meet the environmental or social characteristics promoted by the Funds.

This disclosure is made for Altor ACT I (No. 1) AB, Altor ACT I (No. 2) AB and Altor ACT I (No. 3) AB (together, the “ACT Funds”) and Altor II Co-Invest AB (“Altor II Co-Invest” and, together with the ACT Funds, the “Article 9 Funds”). The Article 9 Funds are managed by Altor.

Summary (for the summary in Swedish, please click here)

Altor has developed a framework for defining sustainable investments as well as ensuring that sustainable investments do not cause significant harm. Altor assesses potential investments against this framework and the Article 9 Funds will not invest where such investments do not meet the do no significant harm criteria considering, inter alia, Altor’s “exclusionary list” and PAI indicators.

The Article 9 Funds have sustainable investments as their respective investment objective, which is defined in accordance with the SFDR. The Article 9 Funds will focus on investments which contributes to certain environmental EU Taxonomy objectives, including any Industrial Greenfield Investment (as defined below), mainly being climate change mitigation and climate change adaptation.

The Article 9 Funds’ investment strategy used to attain the Article 9 Funds’ sustainable investment objective is to make all investments solely in companies that qualify as sustainable investments under the SFDR, which include for example making investments in companies that are deemed suitable in accordance with the SFDR framework Altor has developed. Accordingly, sustainability integration and a robust screening process are a natural part of the Article 9 Funds’ investment strategy. For such purposes, Altor, inter alia, applies an “exclusionary list” meaning that the Article 9 Funds will not directly invest in certain companies. Altor’s policy to assess good governance practices of the portfolio companies of the Article 9 Funds includes that all portfolio companies are required to follow Altor’s Sustainability Standards, including regarding governance, as listed in Altor’s RIO policy.

Altor will invest at least 90 percent of the portfolio of the ACT Funds, and 99 percent of the portfolio of Altor II Co-Invest in assets that Altor deems to be sustainable investments in accordance with the SFDR and with an environmental objective. The remaining 10 percent/1 percent (as applicable) may consist of other balance sheet items that are not possible to consider as sustainable investments under the SFDR, for example, cash, cash equivalents, accounts receivable and accounts payable.

Altor’s Sustainability Standards and the Article 9 Funds’ attainment of their sustainable investment objectives will be monitored via Altor’s annual sustainability performance monitoring process. The monitoring process will entail that sustainability metrics (including information relating to PAI indicators), at least as per the ESG Data Convergence Initiative (www.esgdc.org), are collected from the portfolio companies of the Article 9 Funds via a digital platform and thereafter analysed versus certain factors. The monitoring process will also include Altor’s impact measures, considering inter alia EU Taxonomy alignment, scope 1–3 absolute and/or intensity reduction and scope 4 avoided emissions. The aforementioned performance monitoring process will be internally reviewed regularly, and at least on an annual basis, in order to ensure its continued usefulness and efficiency.

Altor’s Sustainability performance monitoring process will be used also as the methodology to measure the Article 9 Funds’ attainment of their sustainable investment objectives. The sustainability indicators used by the Article 9 Funds will be collected annually from the Article 9 Funds’ portfolio companies and thereafter analysed versus (i) the RIO policy; (ii) prior year performance; and (iii) industry standard performance and benchmarks, in order to measure the attainment of the environmental objectives that the Article 9 Funds intend to attain.

Altor uses sustainability metrics reported from portfolio companies as the data source to attain the Article 9 Funds’ sustainable investment objectives. To ensure proper data quality Altor have engaged a third-party advisor that will perform limited assurance on the data provided.

The major limitation with using the abovementioned sustainability performance monitoring process and using reports from the Article 9 Funds’ portfolio companies that Altor has identified is if portfolio companies do not report on the requested data and/or report data with lacking quality and/or coverage for their respective operations. Altor will work closely with portfolio companies to ensure that the companies understand the importance of reporting as well as how they should report, in order to minimise such limitation. Furthermore, Altor deems the risk of portfolio companies not reporting and/or providing insufficient reports as low.

The due diligence of potential underlying assets of the Article 9 Funds is conducted in-house and/or by external advisors. Sustainability matters and impact potential such as but not limited to scope 4 avoided emissions are typically considered already in early sourcing discussions. In the due diligence process, it is mandatory to present and consider the sustainability risk and impact profile of a potential investment. As part of completing such sustainability risk and impact profile, the investment team needs to fill out a standardized questionnaire, referred to as the Risk Summary which also contains a detailed sustainability section. The purpose of the procedure is to assess whether or not a potential investment can be considered as a sustainable investment under the SFDR. The Risk Summary is reviewed and approved by Altor’s Risk Committee before Altor’s board of directors may decide whether to take the potential investment forward.

Altor always acts as an active owner. Altor’s active ownership includes that all the Article 9 Funds’ portfolio companies shall establish a Sustainability point of contact within their own organisation. Although the Article 9 Funds only invest in companies that qualify as sustainable investments under the SFDR, an assessment shall be made for each portfolio company to further integrate sustainability in the portfolio companies’ operations by way of establishing a value creation agenda.

No index has been designated as a reference benchmark to meet the Article 9 Funds’ sustainable investment objectives. Furthermore, although the Article 9 Funds have a clear intention of reducing carbon emissions, they do not exclusively have a reduction in carbon emissions as their investment objectives per se, but instead to make sustainable investments as defined in the SFDR, which could, for instance, include reducing carbon emissions. Such intention of reducing carbon emissions will be realised by way of the Article 9 Funds’ portfolio companies will be required to set so called Science Based Targets (SBT), or equivalent targets, and their scope 4 avoided emissions will be measured for the purpose of measuring the attainment of the Article 9 Funds’ sustainable investment objectives.

No significant harm to the sustainable investment objective

Altor has developed a framework for defining sustainable investments as well as ensuring that sustainable investments do not cause significant harm. Altor assesses potential investments against this framework and the Article 9 Funds will not invest where such investments do not meet the do no significant harm (“DNSH”) criteria. Altor’s main criteria for assessing that sustainable investments DNSH are:

• All portfolio companies holding sustainable investments shall comply with Altor’s exclusionary list as defined in the RIO policy, which includes a link to specific PAI indicators regarding, inter alia, fossil fuels and controversial weapons, as well as being in alignment with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights; and


• That the relevant portfolio company’s operations are not assessed to cause significant harm to any relevant PAI indicators. If there are potential or actual negative impacts, there must be clear mitigating actions in place with established targets in order for the DNSH assessment to be deemed fulfilled.

The abovementioned “exclusionary list” can be found in the RIO policy, which may be found here.

As part of Altor’s criteria for assessing that sustainable investments DNSH, each target’s or portfolio company’s operations are assessed against the indicators for adverse impacts on sustainability factors, to check that such operations do not cause significant harm to any relevant PAI indicators. If there are potential or actual negative impacts, there must be clear mitigating actions in place with established targets in order for the DNSH assessment to be deemed fulfilled.

The above assessment will be made: (i) before the Article 9 Funds invests in a portfolio company, during the due diligence process, by the Article 9 Funds’ internal investment advisory team and/or by external ESG due diligence consultants and (ii) on an on-going basis once the Article 9 Funds have invested in such portfolio company as part of the annual performance monitoring process described in other sections of this document, see for example under the question “What sustainability indicators are used to measure the attainment of the sustainable investment objective of this financial product?”.

Mandatory PAI indicators

1. GHG emissions;


2. Carbon footprint;


3. GHG intensity of investee companies;


4. Exposure to companies active in the fossil fuel sector;


5. Share of non-renewable energy consumption and production;


6. Energy consumption intensity per high impact climate sector;


7. Activities negatively affecting biodiversity-sensitive areas;


8. Emissions to water;


9. Hazardous waste ratio;


10. Violations of UN Global Compact principles and OECD Guidelines for Multinational Enterprises;


11. Lack of processes and compliance mechanisms to monitor compliance with UN Global Compact principles and OECD Guidelines for Multinational Enterprises;


12. Unadjusted gender pay gap;


13. Board gender diversity; and


14. Exposure to controversial weapons.

Voluntary PAI indicators

• Investments in companies without carbon emission reduction initiatives; and


• Lack of anti-corruption and anti-bribery policies.

Sustainable investment objective of the financial product

The Article 9 Funds’ purposes and objectives are to make, hold, monitor and realise investments (each an “Investment”) which are “sustainable investments” in accordance with Article 2(17) of the SFDR, including alongside other Altor funds, and with a focus on Green Transition Investments and the intention to create capital growth and to realise capital gain and receive income.

A “Green Transition Investment” means for such purpose an Investment which contributes to one or more of the six environmental EU Taxonomy objectives, including any Industrial Greenfield Investment, mainly being (i) climate change mitigation and (ii) climate change adaptation, but also:

• Sustainable use and protection of water and marine resources;


• Transition to a circular economy;


• Pollution prevention; and


• Protection and restoration of biodiversity and ecosystems.

For the avoidance of doubt, a Green Transition Investment, may, or may not be aligned with the EU Taxonomy. It may however be noted that the Article 9 Funds have a target of 20 percent Taxonomy alignment of their investments at the end of the Article 9 Funds’ lifetime.

An “Industrial Greenfield Investment” for such purpose means an Investment in a pre-revenue green transition company for the purpose of a greenfield project, typically with a high initial capital intensity and significant equity requirement for the purpose of supply chain development where the company aims to capitalise on, and contribute positively to, the decarbonisation of supply chains.

The Article 9 Funds will not invest in any investments not fulfilling the requirements of being a sustainable investment in accordnace with the SFDR (with the exception of cash held as ancillary liquidity or as otherwise described in this disclosure).

Investment strategy

As set out above, the Article 9 Funds’ purposes and objectives are to make, hold, monitor and realise Investments which are “sustainable investments” under the SFDR, including alongside other Altor funds, and with a focus on Green Transition Investments and the intention to create growth and to realise capital gain and receive income. Accordingly, sustainability integration and a robust screening process (as referred to above) are a natural part of the Article 9 Funds’ investment strategy, which is to invest in companies meeting that Investment definition (which for the avoidance of doubt could include those investments which contribute to one of the six environmental EU Taxonomy objectives). The companies that will be invested in by the ACT Funds may be based all over the world.

Altor II Co-Invest will, more specifically, invest alongside the ACT Funds as regards certain investments the ACT Funds make. Initially, Altor II Co-Invest will make one investment as further specified in the investment agreement of Altor II Co-Invest, however, it may make additional investments relating to the initial investment in the future.

The Article 9 Funds’ investment strategies are therefore to:

• Make all its investments solely in companies that are Investments which are deemed sustainable investments on the basis of contributing to an environmental objective in accordance with Article 2(17) of the SFDR (except for hedging arrangements or cash deposits, as explained below), based on the framework Altor has developed for defining what sustainable investments under the aforementioned provision is;


• Apply an “exclusionary list” meaning that the Article 9 Funds will not directly invest in companies relating to certain sectors/themes/countries; and


• Be a signatory to and applying the UN Principles for Responsible Investments (UN PRI).

Altor’s policy to assess good governance practices of the portfolio companies of the Article 9 Funds includes that all portfolio companies are required to follow Altor’s Sustainability Standards, including regarding governance, as listed in the RIO policy. Furthermore, Altor annually asks and assesses several questions in regards to good governance to all portfolio companies. Such questions include, inter alia, whether the portfolio companies have a Code of Conduct policy, anti-corruption policy and third-party-whistleblowing processes in place and if the companies have been involved in violations of the UN Global Compact principles or OECD Guidelines for Multinational Enterprises. In its assessment, Altor especially focuses on sound management structures, employee relations, remuneration of staff and tax compliance.

Proportion of investments

The ACT Funds

Altor will invest at least 90 percent of the portfolio in assets that Altor deems to be sustainable investments in accordance with the SFDR and with an environmental objective in a manner as described above. A minor portion of the portfolio in terms of total net asset value, 10 percent, may consist of other balance sheet items that are not possible to align with environmental and/or social characteristics, for example, cash, cash equivalents, accounts receivable and accounts payable.

Altor makes the assessment that the ACT Funds will not have any other types of exposure than direct exposure to the ACT Funds’ portfolio companies.

Altor II Co-Invest

Altor will invest at least 99 percent of the portfolio in assets that Altor deems to be sustainable investments in accordance with the SFDR and with an environmental objective in a manner as described above. A minor portion of the portfolio in terms of total net asset value, 1 percent, may consist of other balance sheet items that are not possible to align with environmental and/or social characteristics, for example, cash, cash equivalents, accounts receivable and accounts payable.

Altor II Co-Invest will not make any indirect investments in portfolio companies through other funds or derivatives, and will thus only have direct exposures in its portfolio companies.

Monitoring of sustainable investment objective

Altor’s Sustainability Standards and the Article 9 Funds’ attainment of their sustainable investment objectives will be monitored via Altor’s annual sustainability performance monitoring process. The monitoring process will entail that sustainability metrics (including information relating to PAI indicators), as per the ESG Data Convergence Initiative (www.esgdc.org), are collected from the portfolio companies of the Article 9 Funds via a digital platform and thereafter analysed versus the following factors

• Altor’s Sustainability Standards in the RIO policy;


• Prior year performance; and


• Industry standard performance/benchmarks.

The monitoring process also includes Altor’s impact measures, considering inter alia EU Taxonomy alignment, scope 1–3 absolute and/or intensity reduction and scope 4 avoided emissions.

The abovementioned performance monitoring process will be internally reviewed regularly, and at least on an annual basis, in order to ensure its continued usefulness and efficiency. Cross-checks and spot-checks will also be made in relation to the analysis of the sustainability metrics provided by the portfolio companies and any unclear reports from a portfolio company will be followed-up upon without delay.

Methodologies

Altor’s Sustainability performance monitoring process will be used also as the methodology to measure the Article 9 Funds’ attainment of their sustainable investment objectives. The sustainability indicators used by the Article 9 Funds will be collected annually from the Article 9 Funds’ portfolio companies and thereafter analysed versus (i) the RIO policy; (ii) prior year performance; and (iii) industry standard. As regards what the monitoring process will entail, please refer to the section “Monitoring of sustainable investment objective” above.

Data sources and processing

Altor uses sustainability metrics reported from portfolio companies as the data source to attain the Article 9 Funds’ sustainable investment objective.

To ensure proper data quality Altor have engaged a third-party advisor that will perform limited assurance on the data provided from the portfolio companies to the Article 9 Funds.

The data will be internally processed at Altor and Altor’s current view is that it will not rely on any third-party estimated data.

Limitations to methodologies and data

The major limitation with using the abovementioned sustainability performance monitoring process and using reports from the Article 9 Funds’ portfolio companies that Altor has identified is if portfolio companies do not report on the requested data and/or report data with lacking quality and/or coverage for their respective operations.

Altor will work closely with portfolio companies to ensure that the companies understand the importance of reporting as well as how they should report, in order to minimise the limitation mentioned above. As further described in section “Engagement policies” below, Altor is also an active owner in relation to, inter alia, sustainability matters and there is continuous communication between each portfolio company and Altor regarding sustainability related matters. Consequently, Altor deems the risk of portfolio companies not reporting and/or providing insufficient reports as low, resulting in that the risk of the abovementioned limitation affecting how the Article 9 Funds’ sustainable investment objective are met also is low.

Due diligence

The due diligence of potential underlying assets of the Article 9 Funds is conducted in-house and/or by external advisors co-ordinated by the respective investment team established by each Article 9 Fund and its advisor and dedicated for the relevant potential investment. Altor’s Investment Advisory Committee is ultimately responsible for the due diligence.

Sustainability matters and impact potential such as but not limited to scope 4 avoided emissions are typically considered already in early sourcing discussions in the context of industry, geographic scope, and maturity of potential targets. In the due diligence process, it is mandatory to present and consider the sustainability risk and impact profile of a potential investment. As part of completing such sustainability risk and impact profile, the investment team needs to fill out a standardized questionnaire, referred to as the Risk Summary which also contains a detailed sustainability section. In the sustainability section, the investment team need to answer if certain ESG/sustainability topics are material or not, what current performance and risk is for the material sustainability topics of the potential investment compared to relevant industry average and/or regulatory requirements, and what future opportunity the team sees for the potential investment to reach the Altor Sustainability Standards as per the RIO policy. The purpose of the procedure is to assess whether or not a potential investment can be considered as a sustainable investment under the SFDR.

In addition to the abovementioned, the due diligence includes an analysis of value creation opportunities, relevant legal, tax, financial or other value affecting factors.

The results of the due diligence are considered by the investment team in dialogue with the central Sustainability resources, who creates a proposal for a binding offer regarding the relevant potential investment if they deem the results satisfying. The proposal is then reviewed by the Investment Advisory Committee who decides whether to recommend that Altor’s board of directors decides to move forward with the binding offer. The proposal is also reviewed and assessed by both Altor’s Risk Committee and Risk Manager, as regards compliance with the relevant Article 9 Fund’s agreement, as well as by Altor’s Investment Committee, before the board of directors may decide whether to take the potential investment forward. Included in the Risk Committee’s review is the abovementioned questionnaire, which is also approved by the Committee. Furthermore, the Risk Summary questionnaire is in scope for Altor’s internal audit.

Engagement policies

Altor’s investment and ownership approach is to act as an active owner, including forwarding Altor’s sustainability agenda, irrespective of a majority or minority ownership position in both private and public settings. Altor’s active ownership includes that all the Article 9 Funds’ portfolio companies shall establish a sustainability point of contact within their own organisation that is responsible for the execution of the portfolio company’s sustainability related policy (or equivalent policies).

Although the Article 9 Funds only invest in companies that qualify as sustainable investments under the SFDR, an assessment shall be made for each portfolio company to further integrate sustainability in the portfolio companies’ operations by way of establishing a value creation agenda. Furthermore, sustainability performance and risk matters shall be discussed at least twice a year by each portfolio company’s board of directors, and all portfolio companies shall at least annually report progress across material sustainability metrics (including information relating to PAI indicators), at least as per the ESG Data Convergence Initiative (www.esgdc.org), to Altor, and upon occurrence and at least quarterly on any potential incidents.

Should any sustainability-related controversies occur in any of the portfolio companies, Altor will, where relevant, take the following measures

• Ensure that internal investigations are conducted;


• Reconfirm the appropriateness of the governance and compliance set-up with the aim of strengthened processes and capability training;


• Through the board of directors assess the appropriateness of the management team; and


• Ensure full cooperation with authorities.

In addition to the above, and as the most basic level of Altor’s active ownership, Altor of course also exercises its voting right at general meetings and participates in nomination procedures to influence the composition of the board in any of the Article 9 Funds’ portfolio companies.

Attainment of the sustainable investment objective

No index has been designated as a reference benchmark to meet the Article 9 Funds’ sustainable investment objectives. Furthermore, although the Article 9 Funds have a clear intention of reducing carbon emissions, they do not exclusively have a reduction in carbon emissions as their investment objectives per se, but instead to make sustainable investments as defined in the SFDR, which could, for instance, include reducing carbon emissions. Such intention of reducing carbon emissions will be realised by way of the Article 9 Funds’ portfolio companies will be required to set so called Science Based Targets (SBT), or equivalent targets, and their scope 4 avoided emissions will be measured for the purpose of measuring the attainment of the Article 9 Funds’ sustainable investment objectives.